Correlation Between Webster Financial and Santander Bank

Can any of the company-specific risk be diversified away by investing in both Webster Financial and Santander Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Webster Financial and Santander Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Webster Financial and Santander Bank Polska, you can compare the effects of market volatilities on Webster Financial and Santander Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Webster Financial with a short position of Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and Santander Bank.

Diversification Opportunities for Webster Financial and Santander Bank

0.03

Correlation Coefficient

Webster Financial  Santander Bank

Significant diversification

The 3 months correlation between Webster and Santander is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and Webster Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Webster Financial are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of Webster Financial i.e., Webster Financial and Santander Bank go up and down completely randomly.

Pair Corralation between Webster Financial and Santander Bank

Assuming the 90 days horizon Webster Financial is expected to under-perform the Santander Bank. But the stock apears to be less risky and, when comparing its historical volatility, Webster Financial is 1.46 times less risky than Santander Bank. The stock trades about -0.23 of its potential returns per unit of risk. The Santander Bank Polska is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,030  in Santander Bank Polska on October 16, 2024 and sell it today you would earn a total of  285.00  from holding Santander Bank Polska or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Webster Financial  vs.  Santander Bank Polska

Webster Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Webster Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Santander Bank Polska

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Santander Bank Polska are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Santander Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Webster Financial and Santander Bank

The main advantage of trading using opposite Webster Financial and Santander Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, Santander Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Santander Bank will offset losses from the drop in Santander Bank's long position.

The idea behind Webster Financial and Santander Bank Polska pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..